TFSA vs. RRSP Decision Tool 2025
Which account wins at your marginal rate — including the FHSA 3-way decision.
Inputs
Side-by-Side Growth
The math behind your result
Every number on this page is derived from the exact Canadian regulatory formula — not approximations or estimates. The calculation runs entirely in your browser using the inputs you provided. Expand the section below to verify the math step-by-step, or share the URL to reproduce these exact results.
▶ How is this calculated?
TFSA — tax-free compounding
TFSA final = contributionAmount × (1 + r)^n No tax ever — on contributions, growth, or withdrawals.
RRSP — deferred tax on withdrawal
RRSP gross = contributionAmount × (1 + r)^n RRSP after tax = grossBalance × (1 - retirementMarginalRate) RRSP refund today = contributionAmount × currentMarginalRate (The CRA returns this as a tax refund on your T1) If you reinvest the refund in a TFSA: RRSP + refund reinvested = rrspAfterTax + rrspRefund × (1 + r)^n
Decision rule
if (firstHomeBuyer && amount ≤ $40,000) → FHSA first if (retirementRate ≥ currentRate) → TFSA (certainty wins) if (currentRate > retirementRate + 5pp) → RRSP (clear spread advantage) else → SPLIT (marginal, split hedges risk)
Why the FHSA is special
The First Home Savings Account (2023) is the only Canadian account that is simultaneously tax-deductible on contribution (like RRSP) AND tax-free on qualifying withdrawal (like TFSA). It dominates both accounts for first-time buyers until the $40,000 lifetime limit is reached. Source: Dept. of Finance Canada — Budget 2022, FHSA regulations.
Drawdown mode — which account to draw first
Each year: both balances grow at your expected return, then the annual
withdrawal is taken from the "first" account — spilling into the second
once the first runs out.
RRSP withdrawal → spendable = amount × (1 - retirementMarginalRate)
TFSA withdrawal → spendable = amount (never taxed)
RRSP-first vs TFSA-first are compared on:
1. Does either run out before your horizon? A strategy that lasts
the full horizon always beats one that runs out.
2. If both run out, whichever lasts more years wins.
3. If neither runs out (or both run out in the same year), whichever
produces more total after-tax spendable cash wins. Deliberately not modeled: non-registered accounts, CPP/OAS, RRIF minimum withdrawals, and inflation — see the FAQ below for why, and where to model those instead.
About the TFSA vs RRSP Calculator
The core decision rule
The standard tax-shelter textbook answer: contribute to an RRSP when your current marginal rate exceeds your expected retirement marginal rate, and to a TFSA when the rates are equal or reversed. The logic is that an RRSP defers tax — you save at today's rate, but pay at tomorrow's rate. If tomorrow's rate is lower, you come out ahead. If it is higher, you don't.
For equal rates the math is identical, but the TFSA wins on certainty: your RRSP withdrawal tax rate is not actually known today, whereas the TFSA is tax-free by law regardless of future tax policy changes.
TFSA vs RRSP vs FHSA at a glance (2025)
| Feature | TFSA | RRSP | FHSA |
|---|---|---|---|
| Contribution deductible? | No | Yes — reduces taxable income | Yes — like an RRSP |
| Withdrawal taxation | Tax-free, always | Fully taxable as income | Tax-free for a qualifying first home |
| 2025 annual limit | $7,000 | $32,490 (or 18% of prior-year income) | $8,000 |
| Lifetime / carry-forward room | $102,000 cumulative (since 2009), carries forward indefinitely | Carries forward indefinitely | $40,000 lifetime; must be used within 15 years of opening |
| Withdrawn room restored? | Yes — next calendar year | No — withdrawn room is gone (except HBP repayment) | No — closes the account or transfers to RRSP |
| Best for | Equal/higher retirement tax rate, flexibility, benefit-clawback avoidance | Higher current tax rate than expected retirement rate | First-time home buyers within a 15-year horizon |
Figures shown above match the calculator's own defaults and the CRA source cited in the trust badge near the top of this page — see the "How is this calculated?" section for the underlying formulas.
The RRSP refund — the most overlooked piece
When you contribute to an RRSP, you receive a tax refund equal to your marginal rate times the contribution. At 43.41% on a $7,000 contribution, that's $3,039 back on your next tax return. The calculator shows you two RRSP scenarios: (1) the after-tax withdrawal value alone, and (2) the combined value when you reinvest that refund in a TFSA. Scenario 2 is the fair comparison — disciplined RRSP investors reinvest their refunds, and this is why RRSP often wins even more than the raw rate comparison suggests.
The FHSA — a new option since 2023
The First Home Savings Account, introduced in the 2022 federal budget and available from April 2023, is the most powerful registered account for first-time buyers. Contributions are deductible from income (like RRSP), and withdrawals for a qualifying first home purchase are completely tax-free (like TFSA). It is the only account in Canada that offers both benefits simultaneously. The annual limit is $8,000, the lifetime limit is $40,000, and the account must be used within 15 years of opening. If you are a first-time buyer with room available, you should maximize the FHSA before making RRSP or TFSA decisions.
When is the TFSA better despite a higher current rate?
Several real-world scenarios can make the TFSA better even when your current rate is higher: (1) You may receive OAS clawback in retirement if your income (including RRIF minimums) pushes past $93,454 (2025) — TFSA withdrawals don't count as income; (2) You may have income-tested benefits in retirement (GIS, provincial drug plans) that RRSP/RRIF withdrawals reduce but TFSA withdrawals don't; (3) You may value flexibility — TFSA withdrawals don't reduce future contribution room (room is restored the following year), unlike RRSP which is one-way. The SPLIT recommendation captures situations where the math is close and diversifying across both accounts hedges these risks.
Not financial advice. This calculator provides estimates for informational and educational purposes only. Tax rates, registered account limits, and benefit clawback thresholds change annually. Consult a licensed financial advisor, tax professional, or CPA for personalized advice. All calculations happen in your browser — no input data is sent to any server.
Related calculators
- Canadian Income Tax Calculator — Find your exact marginal rate, then click "Open in TFSA vs RRSP" to pre-fill this calculator.
- Compound Interest / Investment Projection — Model monthly contributions over multiple scenarios.
- Retirement Projection — CPP + OAS + RRIF withdrawal phasing to estimate your retirement income.
Frequently asked questions
Should I invest in a TFSA or RRSP in Canada?
RRSP wins if your retirement marginal tax rate will be lower than your current rate; TFSA wins if you expect the same or higher rate in retirement. For most Canadians earning $50,000–$100,000, the RRSP refund re-invested in a TFSA produces the best outcome. This calculator shows the exact dollar advantage at your specific income and province.
What is the TFSA contribution limit for 2025?
The 2025 TFSA annual limit is $7,000. The cumulative lifetime limit (for anyone who has been 18 and a Canadian resident since 2009) is $102,000 as of 2025. Unused room carries forward indefinitely. Withdrawals restore room on January 1 of the following calendar year — you can re-contribute that amount without penalty.
How does the RRSP tax deduction work?
An RRSP contribution reduces your taxable income dollar-for-dollar in the year you claim it, generating a refund at your marginal rate. A $10,000 contribution at a 33% marginal rate produces a $3,300 refund. All RRSP withdrawals in retirement are taxable as income. The advantage comes from tax-rate arbitrage: if your retirement income is taxed lower than your contribution deduction rate, you keep the difference permanently.
What happens to my RRSP at age 71 in Canada?
You must convert your RRSP to a RRIF (Registered Retirement Income Fund) by December 31 of the year you turn 71. RRIFs have mandatory minimum withdrawals starting at roughly 5.28% at age 72, rising each year. All withdrawals are fully taxable income, which can trigger OAS clawback (above $93,454 in 2025) and reduce GIS eligibility.
What is the FHSA and should first-time buyers prioritize it over TFSA/RRSP?
The First Home Savings Account (FHSA, launched 2023) combines RRSP deductibility with TFSA-style tax-free withdrawals for a first home purchase. Annual limit: $8,000; lifetime limit: $40,000. If you plan to buy your first home within 15 years, the FHSA should be your first priority — it offers a double tax benefit that neither TFSA nor RRSP alone can match.
RRSP vs TFSA: does OAS or GIS clawback change the answer?
Yes. RRSP/RRIF withdrawals count as taxable income, which can trigger the OAS clawback once net income exceeds $93,454 (2025) — you lose 15 cents of OAS for every dollar above that threshold, and low-income retirees can also see GIS eligibility reduced. TFSA withdrawals never count as income, so they never trigger either clawback. If you expect retirement income near or above the OAS clawback threshold, that risk favours the TFSA even when the raw marginal-rate math looks close to even — this calculator's SPLIT recommendation exists for exactly that kind of close call.
Is RRSP or TFSA better for most Canadians?
Same question as "TFSA vs RRSP" — the order of the words doesn't change the math. The RRSP tends to win when your current marginal tax rate is meaningfully higher (more than about 5 percentage points) than your expected retirement rate, because the up-front deduction is worth more than the tax you'll eventually pay. The TFSA tends to win when your rates are similar or your retirement rate could be equal or higher — plus it protects you from OAS/GIS clawback risk. Use the calculator above with your own numbers rather than a rule of thumb, since the crossover point depends on your specific rates, return assumption, and time horizon.
I already have RRSP and TFSA savings — which should I draw down first in retirement?
Switch this calculator to "In retirement (drawdown)" mode and enter your existing balances. There's a real trade-off: drawing your RRSP first uses up tax-deferred room while you're likely in a lower bracket than your peak earning years, but it also means your TFSA keeps compounding tax-free the longest. Drawing your TFSA first preserves RRSP room and gives you certainty (no future tax-rate risk on the TFSA), but the RRSP grows tax-deferred rather than tax-free while you wait. The calculator runs both orders against your actual balances and tells you which one keeps your money lasting longer, or produces more spendable cash if both last the full horizon.
Should I withdraw a mix from both accounts instead of one at a time?
Many retirees do blend withdrawals in practice, and a proportional strategy can make sense for smoothing tax brackets year to year. This calculator deliberately compares only two clean strategies — RRSP-first and TFSA-first — because they're the two ends of the spectrum and the easiest to reason about; a blended approach is a refinement on whichever end wins here, not a fundamentally different answer for most retirees.
Does this calculator account for CPP, OAS, or RRIF minimum withdrawals?
No — drawdown mode intentionally keeps the RRSP-vs-TFSA order question separate from full retirement-income planning. It doesn't model CPP/OAS benefits, mandatory RRIF minimum withdrawals starting at age 71/72, or inflation. For a complete retirement income plan that layers in CPP/OAS timing and RRIF mechanics, see the FIRE Advanced Toolkit's CPP & OAS Timing tab and the Retirement Projection calculator.
What about my non-registered investment account in retirement?
This calculator is scoped to RRSP vs TFSA specifically and doesn't model non-registered accounts. As a rule of thumb, non-registered accounts are usually the last resort to draw from — they don't have the tax-deferral clock RRSPs face, and capital-gains tax treatment there is already more favourable than ordinary income tax, so most retirees draw down RRSP and/or TFSA first and treat non-registered savings as the account they touch last.